Kentucky has lost out on the second round of federal "Race to the Top" education funding.

Kentucky education commissioner Terry Holliday said the state improved its performance on its second-round application for $175 million of the grant money, receiving more than 412 points out a possible 500. But the state could not overcome receiving zero points in the charter schools category, Holliday said, "and that was 32 points that we lost."

"I've called around (to) a few folks, and it looks like we would have been in the money if we had charters," he said. "... I was never a strong supporter of charter schools; I just knew that to get this funding, we needed legislation."

A last-minute push to approve charter schools — publicly funded schools that operate outside traditional state regulations — died earlier this year in the Kentucky General Assembly.

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The Race to the Top program, part of President Barack Obama's economic stimulus plan, rewards states for embarking on ambitious reforms to improve struggling schools, close the achievement gap and boost graduation rates.

After losing two rounds of the federal Race to the Top money, the state likely will have to figure out how to pay for planned testing and curriculum improvements with existing funds, Holliday said.

"We have a very powerful reform agenda," Holliday said. "It's competitive with any state out there."

In 2009, Kentucky legislators approved Senate Bill 1, which called for new, more demanding state education standards aligned from preschool to college. In February, the The Kentucky Board of Education, the state Council on Postsecondary Education and the state Education Professional Standards Board voted for Kentucky to become the first state to formally adopt new "common core content standards" for math and English language arts in grades K-12.

Democratic House Speaker Greg Stumbo, whose chamber did not take up charter schools legislation, said in a statement Tuesday "it's a shame that we lost an opportunity." Democratic Gov. Steve Beshear also said he was disappointed.

Senate President David Williams, R-Burkesville, said Kentucky lost out "because of the lack of willingness of Gov. Beshear and certain members of the General Assembly to enact even voluntary charter schools" approved by local school boards.

Williams said Beshear should have tried harder to build consensus on the issue.

State Rep. Brad Montell, R-Shelbyville, who filed charter schools legislation earlier this year, said he will file another proposal next year.

"Until we have charter schools in Kentucky, we will continue to fall behind other states who receive funding through 'Race to the Top,' which will have a long-term negative impact on our children and our economy," Montell said.

Phil Moffett, a Louisville businessman who is a Republican candidate for governor in 2011, has made the drive for charter schools in Kentucky a centerpiece of his campaign. Williams also is considering a run for governor.

Robert Sexton, executive director of the Prichard Committee on Academic Excellence, said passing the charter school legislation would have been "pretty much a no-cost way to get $175 million."

Although his group favored the charter school legislation, Sexton said he doesn't believe it would have ever affected many Kentucky children. He noted Tennessee has had charter schools for several years, but only a small percentage of kids attend one.

"It's hard to imagine that that alone would drive these decisions on a federal level, and if it did it's just a shame and a serious mistake on the part of the U.S. Department of Education, because it's such a minor part of accomplishing what they're trying to accomplish in Race to the Top," Sexton said.

State Sen. Julian Carroll, D-Frankfort, said the loss makes the challenge of education funding "even greater for the General Assembly in the legislative session next year."

Carroll said the legislature needed more time to define what a charter school proposal would mean for the state. "Had we defined it in some way maybe it would have been acceptable to our current associations," he said.

"We offered several times to work on legislation dealing with high accountability and certified teachers in relationship to charter schools, but our offer wasn't accepted," KEA president Sharron Oxendine said.

She said the loss of Race to the Top funds will make it less likely Kentucky will approve charter schools.

"There's no reason to change the system of public schools we have now," she said. "What we have to do is find the proper funding for our schools, especially to implement Senate Bill 1."

Florida, Georgia, Hawaii, Massachusetts, Maryland, New York, North Carolina, Ohio, Rhode Island and Washington, D.C., will receive grants, U.S. education department spokesman Justin Hamilton said Tuesday. The amounts for each state were expected to be announced later, but the total pool of money available is $3.4 billion.

U.S. Education Secretary Arne Duncan said very few points separated the 10 winners from the remaining applications. The deciding factor on the number of winners selected hinged on both the quality of the applications and the funds available, he said.

"We're very hopeful there will be a Phase 3 of Race to the Top and have requested $1.35 billion dollars in next year's budget," Duncan said. "In the meantime, we will partner with each and every state that applied to help them find ways to carry out the bold reforms they've proposed in their applications."

Tennessee and Delaware were winners in the first round of the competition in March, sharing $600 million.